Tuesday - February 25, 2014, 10:40am ET

Current Trend Direction: Sideways, just above resistance at the 200-day Moving Average

Float/Lock Bias: Carefully Floating

Current Price of FNMA 4.0% Bond: $104.44 +22bp

Mortgage Bonds gapped or opened higher and away from the 200-day MAa modestly positive sign to start the day. Softness in Stocks is reason for the higher bond prices. The S&P 500 hit an all-time intraday high yesterday of 1,858.71, before closing at 1,847.81.

There was some mixed news from the housing sector. The Case Shiller 20-city Index rose by 13.4% year-over-year, just below the 13.6% expected, while from November to December, prices rose by 0.8% on a seasonally adjusted basis. The Index ended its best year since 2005, David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices, said in a statement. However, Mr. Blitzer said that "gains are slowing from month to month, and the strongest part of the recovery in home values may be over." Not a surprise given the relative increase in rates.

The Treasury will be selling $32B 2-Year Notes today, part of the total of $96B set to be sold this week. The results at could impact trading, so stay tuned.

Technically, we are encouraged by the gap higher, but are not going to float and go on an extended vacation. Lets start the day floating and see if prices can build on the positive open.

Joe Shamie NMLS # 241432

First Choice Loan Services NMLS # 210764

First Choice Bank NMLS# 177877

866-970-3400 x-5135

jshamie@fcbmtg.com